Forward premiums held largely steady, but bond prices dipped in noon dealsamid firm call money rates and increased volatility in the foreign exchangemarket.

Bond prices fell by 15-20 paise, as traders stayed away ahead of theprice-based auction of the 11.90 per cent 2007 paper, even as a few dealersanticipated liquidity-tightening measures by the RBI to reign in therupee.

The central bank said statement said: "The RBI has been watching theinter-bank transactions between 9 and 10 in the morning. According to marketinformation, there were few transactions of small value, while the price wasbeing moved sharply higher by some banks. This indicates that the inter-bankthis morning, despite the RBI's repeated reminders, seems to be speculativein nature. The RBI has instructed banks to maintain square position for theday. If neccessary, the RBI will intervene directly in the market. Allgenuine market participants would do well to take this into account."

Opening the day at 44.735/75, against its overnight close of 44.725/735, therupee touched an intra-day low of 44.95 soon thereafter. "Trades werelargely inter-bank in early trades, but when the rupee went lower, there wasa fair bit of corporate interest for dollars," e-Mecklai's seniorvice-president KN Dey said.

The RBI's statement that trades were small in nature and, therefore,speculative, and that banks must keep square positions saw the rupee gain tothe 44.58 levels before falling to 44.7350/75 at the close. Senior dealerssaid it appeared as if the RBI did not want the rupee to go lower than the44.80 levels.

The fall in the spot rupee to the 44.95 levels in intra-day trades did nothave much of a bearing on forward premiums. The six-month annualised forwardpremium was quoted at 2.97 per cent (2.90 per cent). June dollars endedunchanged at 7/8 paise, and July at 19/20 paise (18/19). November closed at63/65 paise (61/63), and December at 75/77 paise (72/74).

There was no paying pressure. Receiving is seen commencing only after theuncertainty over liquidity clears. The market was eagerly waiting to see ifthe RBI took measures to tighten liquidity to keep the rupee's fall in check.In the bond market, firmer call rates at the 9.25 per cent levels andanxiety over the response to the auction of the 11.90 per cent 2007 paperfor Rs 4,000 crore -- underwriting commission to primary dealers for theauction was at a high of 74 paise per Rs 100 -- saw prices slip. The 11.15per cent 2002 was quoted at Rs 102.50, compared with Rs 102.65 on Wednesdayevening. The 12.50 per cent 2004 was traded at Rs 108.60, compared withWednesday evening's levels of Rs 108.75. Market players availed of Rs 2,260crore from the RBI's newly introduced liquidity adjustment facility.